Library / Income-tax Act, 2025: The Professional's Master Guide

11. Income from Other Sources (Sections 92 to 95)

This is the residual head. Any income that is not exempt and not taxable under the other four heads falls here. Section 92 lists specific items that are always taxed here, even if they could arguably fall elsewhere.

11.1 Items taxed under this head

Item	Key points
Dividends	Taxed at slab rates in the hands of shareholders. TDS at 10% above Rs. 10,000. Deemed dividends (loans to substantial shareholders by closely held companies) included
Interest	On savings accounts, FDs, bonds, NSC, loans given, and interest on income tax refund
Family pension	Received by legal heirs of a deceased employee
Winnings	Lottery, crossword, card games, gambling, betting, game shows and online games at a flat 30%
Gifts	Money, immovable property or specified movable property received without or for inadequate consideration
Rent of plant, machinery or furniture	When not a business; also composite letting of building with machinery where they cannot be separated
Keyman insurance	Sums received, including bonus, if not taxable as salary or business income
Interest on compensation or enhanced compensation	Taxed on receipt, with a 50% deduction
Advance forfeited	Advance received and forfeited in negotiations for transfer of a capital asset
Compensation for termination of employment	Compensation received in connection with termination or modification of employment terms, if not salary

11.2 Dividends and deemed dividends

Dividends are fully taxable in the hands of shareholders at their applicable rates. From Tax Year 2026-27, no deduction is allowed for interest paid on money borrowed to invest in shares or mutual funds against dividend or fund income.

A loan or advance by a closely held company to a shareholder holding 10% or more of the voting power, or to a concern in which such a shareholder has a substantial interest, is treated as dividend to the extent of the company's accumulated profits. Loans in the ordinary course of a money lending business are excluded.

Illustration 67: Deemed dividend

A private company with accumulated profits of Rs. 50 lakh gives a loan of Rs. 20 lakh to Mr. Kapoor, who holds 15% of its shares. The Rs. 20 lakh is deemed dividend in Mr. Kapoor's hands and taxed at his slab rate. The company must deduct TDS at 10%. When the loan is later repaid, there is no reversal of the tax.

11.3 Gifts in detail

What is received	Taxable amount
Money without consideration, aggregate above Rs. 50,000 in the year	Whole amount
Immovable property without consideration, stamp duty value above Rs. 50,000	Stamp duty value
Immovable property for inadequate consideration, if difference exceeds higher of Rs. 50,000 and 10% of consideration	Stamp duty value less consideration
Movable property (shares, jewellery, art, bullion, drawings, sculptures, archaeological collections) without consideration, FMV above Rs. 50,000	FMV
Movable property for inadequate consideration, difference above Rs. 50,000	FMV less consideration

Exempt: gifts from relatives (spouse, brother, sister, their spouses, siblings of either parent, lineal ascendants or descendants of self or spouse, and their spouses), on marriage, by will or inheritance, in contemplation of death, from local authorities, from registered trusts, and transfers not regarded as transfer under section 70 such as in amalgamation.

Illustration 68: Gifts from friends

Karan receives Rs. 30,000 from a friend in June, Rs. 45,000 from another friend in October, Rs. 2,00,000 from his uncle, and Rs. 1,50,000 in cash gifts at his wedding.

Uncle is a relative and wedding gifts are exempt. Gifts from friends total Rs. 75,000, above Rs. 50,000, so Rs. 75,000 is fully taxable.

Illustration 69: Property bought below stamp value

Meera buys a plot for Rs. 60 lakh. Stamp duty value is Rs. 70 lakh. Difference Rs. 10 lakh. Tolerance is the higher of Rs. 50,000 and 10% of Rs. 60 lakh (Rs. 6 lakh). Rs. 10 lakh exceeds Rs. 6 lakh, so Rs. 10 lakh is taxable in Meera's hands, and her cost for future capital gains becomes Rs. 70 lakh.

Illustration 70: Shares received below FMV

A company transfers unlisted shares with FMV of Rs. 12 lakh to an employee who is not a relative, for Rs. 5 lakh (outside an ESOP scheme). Difference of Rs. 7 lakh exceeds Rs. 50,000, so Rs. 7 lakh is taxable under this head.

11.4 Deductions (section 93) and disallowances (section 94)

Allowed (section 93)	Not allowed (section 94)
Commission paid to a banker for realising dividend or interest	Personal expenses
Depreciation, repairs and insurance on machinery or building let out	Interest payable outside India without TDS
Family pension: one third or Rs. 25,000 (new regime) or Rs. 15,000 (old regime), lower	Any expense against winnings from lottery, games and betting
50% of interest on compensation or enhanced compensation	Interest on borrowings for dividend or mutual fund income (from Tax Year 2026-27)
Any other expense wholly and exclusively for earning the income	Wealth tax and similar payments

Illustration 71: Interest on enhanced compensation

Govind receives Rs. 5,00,000 as interest on enhanced compensation for land acquired by the state. Deduction of 50% = Rs. 2,50,000. Taxable: Rs. 2,50,000 in the year of receipt.

Illustration 72: Family pension

Mrs. Rao receives family pension of Rs. 3,00,000 in Tax Year 2026-27 and is in the new regime. Deduction = lower of one third (Rs. 1,00,000) and Rs. 25,000 = Rs. 25,000. Taxable: Rs. 2,75,000.

Illustration 73: Winnings

Ajay wins Rs. 5,00,000 in a television quiz show. He spent Rs. 20,000 on travel for the show. Taxable income = Rs. 5,00,000 (no deduction). Tax at 30% = Rs. 1,50,000 plus cess. The organiser deducts TDS at 30% under section 393(3). Basic exemption and the section 156 rebate cannot be used against this income.

11.5 Method of accounting

Income under this head is computed as per the method of accounting regularly followed (cash or mercantile). A final dividend is taxed in the year in which it is declared, and an interim dividend in the year in which it is paid or made available; interest on enhanced compensation and keyman amounts are taxed on receipt.

11.6 More items and timing rules

Interest on securities and bonds is taxed on accrual for persons following the mercantile system, and on receipt for those on cash basis. Zero coupon bonds are taxed as capital gains on transfer or maturity.
Interest on income tax refund is taxed in the year of receipt.
Winnings in kind (a car won in a contest) are taxed at their value. The payer must ensure the 30% TDS is paid before releasing the prize; often the winner pays the TDS amount to the organiser.
Casual income such as a windfall is taxable unless it falls in an exemption (for example, gifts from relatives).
Rent from sub-letting a property taken on rent is taxed here (the sub-lessor is not the owner, so it is not house property income). Rent paid to the owner and maintenance costs are deductible.

Illustration 74: Sub-letting

Rohan takes a shop on rent at Rs. 40,000 a month and sub-lets half of it at Rs. 30,000 a month. He is not the owner, so Rs. 3,60,000 a year is taxed as income from other sources. He can deduct the proportionate rent paid, Rs. 20,000 x 12 = Rs. 2,40,000. Taxable = Rs. 1,20,000.

Illustration 75: Car won in a contest

Priti wins a car worth Rs. 10,00,000 in a retail contest. TDS at 30% = Rs. 3,00,000. The organiser asks her to pay Rs. 3,00,000 before handing over the car, deposits it as TDS, and issues a certificate. Priti reports Rs. 10,00,000 as winnings, pays tax at 30% plus cess, and claims the Rs. 3,00,000 TDS credit.

Chapter summary

• Residual head covering dividends, interest, winnings, gifts and specified receipts.

• Gifts from non-relatives above Rs. 50,000 are taxable, with stamp value and FMV rules for property.

• Deemed dividends apply to loans by closely held companies to substantial shareholders.

• Winnings are taxed at 30% with no deductions or exemption limit.

• No deduction of interest against dividend or fund income from Tax Year 2026-27.